FSF - Fonterra Shareholders Fund

[LoungeLizard]

Yes, looking good, but looks like the cat is out of the bag. I didn't quite get to my target, but am happy with what I got and picked up an extra 4000 on open for $7.50. Might pick up another lot if price comes back this afternoon. I think this is called greed.  

Probably still room for further improvement in the SP tomorrow. The result should be very good, the dividend could be around (my guess) 30c and there may be more details about the capital return, which if anyone has forgotten, has been flagged as being $2 per share.
And on that, I would like to see a bit more transparency about the return, particularly that it will apply to unit holders as well as shareholders. The assumption is that it will - there would be no basis not to - but it would be good to see it in writing!

[mike2023]

Since the initial announcement they have upgraded the sale price quite significantly. I'm picking 2 dollars minimum.

[seaweed]

Probably still room for further improvement in the SP tomorrow. The result should be very good, the dividend could be around (my guess) 30c and there may be more details about the capital return, which if anyone has forgotten, has been flagged as being $2 per share.
And on that, I would like to see a bit more transparency about the return, particularly that it will apply to unit holders as well as shareholders. The assumption is that it will - there would be no basis not to - but it would be good to see it in writing!

Sorry about that. Was buying in aggressively in last 45 min of trading from $7.64. Am also looking forward to results tomorrow. 

[Tim nice but dim]

And on that, I would like to see a bit more transparency about the return, particularly that it will apply to unit holders as well as shareholders. The assumption is that it will - there would be no basis not to - but it would be good to see it in writing!

I too am nervous about capital return to unit holders, especially after unsubstantiated comments on the other channel.

see https://www.fonterra.com/content/dam/fonterra-public-website/fonterra-new-zealand/documents/pdf/fsf/deed-of-amendment-and-restatement-of-authorised-fund-contract.pdf

p22 section 11.1

"11. DISTRIBUTIONS AND SECURITIES OFFERINGS

11.1 Distributions: On each occasion that Fonterra declares or pays any dividend or makes any other
Distribution, Fonterra and the Manager shall co-operate to ensure that record dates and other
mechanics are aligned to enable the relevant entitlement to be passed through to the appropriate
Unit Holders."

I hope I have read this right & conclude that ANY distribution shall apply to unit holders. Not sure what the word "appropriate" means in this context.

1 sleep to the final dividend announcement.

I would not expect to see any further details on the reimbursement details until an info pack is prepared for Farmer Shareholder for the vote. I would love to see what they are doing with the rest of the $$$$$ from the sale outside of the $2.00 returned to holders.

[Habitz]

LL
same status as last capital return in 2023. To both FSF and FCG.
There is no need to keep wondering when you have tools to essily check

[Left Field]

Here's the news folks ......holders should be happy.....nice to see dividend increased (.35c final divvy,)  tho' eps flat.

https://www.nzx.com/announcements/459423

Fonterra reports continued strong performance in FY25
 
 · Total Group revenue: NZ $26 billion, up 15%
 · Total cash returns to shareholders: $16 billion, up 30.6%
 · Operating profit: NZ $1,732 million, up 13%
 · Profit after tax: NZ $1,079 million, down 4%, up 13% tax-adjusted
 · Normalised earnings per share: 71 cents, no change, up 13 cents tax-adjusted
 · FY25 full year dividend, fully imputed: 57 cents per share, up from 55 cents unimputed
 · Return on Capital: 10.9%, down from 11.3%, up from 10.0% tax-adjusted

Fonterra's FY26 forecast earnings from continuing operations, which excludes the businesses to be divested, is 45-65 cents per share.
 
 "Our forecast earnings for the year ahead exclude earnings from the businesses to be divested and is in line with the strong performance we've delivered in FY25."
 
 Looking further ahead, as well as targeting earnings to return to current levels in three years, Fonterra has confirmed it is maintaining the strategic targets and policy settings announced in September 2024, if Mainland Group is divested.
 
 This includes a target average Return on Capital of 10-12% from FY26, which is above Fonterra's 5-year average.
 

[Basil]

Looking forward. Back out the final divvy of 35 cps and the pending $2 capital return you have eps at mid point of forecast of 55 cps on a net share price of $5.55.

Forward PE of 10. They say they aim to have eps back to 71 cents within 3 years which if achieved would put it on a FY28 PE of 8.

These metrics look sort of okay to me but I can't shake my sense that this is a cyclical commodity company trading at the top of the cycle in which case they should be trading on lower metrics.

 The spread between the two different classes of shares suggests one is overpriced or the other is underpriced. Do non farmer shareholders really know better than farmers deeply involved in the industry ?  Best wishes to holders.

[Habitz]

Looking forward. Back out the final divvy of 35 cps and the pending $2 capital return you have eps at mid point of forecast of 55 cps on a net share price of $5.55.

Forward PE of 10. They say they aim to have eps back to 71 cents within 3 years which if achieved would put it on a FY28 PE of 8.

These metrics look okay to me but I can't shake my sense that this is a cyclical commodity company trading at the top of the cycle. What could possibly go wrong...

Good observations. Have you factored in the management team, they're underpromising and over delivering?

[Tim nice but dim]

looking back when this was first announced the estimated sale price was $2.6 - $3.4 B. They got $3.845 B in the end so they have far exceeded the initial predictions.

Given that return to holders will be $2.00/share (with 1,716,601,539 shares on issue) resulting in return to holders of $3.432 B. So the sale process has chewed up $413 M of the sale price or 10.74% of proceeds. I didn't think this would

https://api.nzx.com/public/announcement/459423/attachment/452902/459423-452902.pdf

https://api.nzx.com/public/announcement/459423/attachment/452902/459423-452902.pdf

More detail on sale process today

Slide 17
Sale costs $300M
Retained earnings $700M

[mike2023]

Looking forward. Back out the final divvy of 35 cps and the pending $2 capital return you have eps at mid point of forecast of 55 cps on a net share price of $5.55.

Forward PE of 10. They say they aim to have eps back to 71 cents within 3 years which if achieved would put it on a FY28 PE of 8.

These metrics look sort of okay to me but I can't shake my sense that this is a cyclical commodity company trading at the top of the cycle in which case they should be trading on lower metrics.

 The spread between the two different classes of shares suggests one is overpriced or the other is underpriced. Do non farmer shareholders really know better than farmers deeply involved in the industry ?  Best wishes to holders.

The company and the commodity are actually quite separate in this instance.  Usually a lower milk price equates to higher earnings. So to be achieving this in a stronger sales environment is actually positive long term.

[LoungeLizard]

Excellent result as expected and a (slightly) unexpected divvy of 35c. Congrats to holders.

[Left Field]

These metrics look sort of okay to me but I can't shake my sense that this is a cyclical commodity company trading at the top of the cycle in which case they should be trading on lower metrics.

The future risk with FSF is whether the decision to sell the retail brands; a.) will be approved, and b.) proves to be the right decision.

There's certainly risks with execution of their forward strategy.  Only time will tell if FSF are on the right track.

These risks are somewhat mitigated by the healthy 70% SP gain in the last 12 months, past and projected dividends plus capital return.

Holders who purchased at lower prices in the last 12 months are likely 'well positioned' IMO.

[LoungeLizard]

LL
same status as last capital return in 2023. To both FSF and FCG.
There is no need to keep wondering when you have tools to essily check

Yes, we all know what was done in the past, and it is likely that shareholders and unit holders will continue to be treated the same. But we also know that unit holders have no legal or voting rights so we are dependent on what is voted upon in the shareholders meeting. That, in my mind at least, creates a shadow of uncertainty.
It is highly unlikely that unit holders will be treated differently but it would be nice to see that spelt out in writing at some point.

[mike2023]

Looking forward. Back out the final divvy of 35 cps and the pending $2 capital return you have eps at mid point of forecast of 55 cps on a net share price of $5.55.

Forward PE of 10. They say they aim to have eps back to 71 cents within 3 years which if achieved would put it on a FY28 PE of 8.

These metrics look sort of okay to me but I can't shake my sense that this is a cyclical commodity company trading at the top of the cycle in which case they should be trading on lower metrics.

 The spread between the two different classes of shares suggests one is overpriced or the other is underpriced. Do non farmer shareholders really know better than farmers deeply involved in the industry ?  Best wishes to holders.

The commodity and the company can be quite separate things in this instance. The fact they are profitable now when the input cost, milk, is high, actually bodes well for the future. As a rule the company made more money when farmers were paid less. Particularly food service.

That and increased milk supply expectations. The tides been outgoing for quite a while so it's good to see.

[Habitz]

Good observations. Have you factored in the management team, they're underpromising and over delivering?

Fonterra has been under-rated after they got rid of past ghosts and that took a long time to work through the share price. Momentum over the last year possibly carried the shares too far, unsurprisingly as positive announcement followed positive announcement. Time will tell